The Corporation of London is set to approve the construction of Norman Foster's 41-storey Swiss Re Tower, dubbed an "erotic gherkin" by some design critics, on the site of the former Baltic Exchange headquarters.

A report drawn up by City of London planning officers has just been completed recommending that the project is allowed to go ahead. A final decision is due on Wednesday, when the corporation's planning committee meets to discuss the report.

A corporation spokesman confirmed planning officers had given the thumbs-up to the project but added: "It's not for me to prejudge what the committee will say."

The all-glass building is likely to cost up to £300m, and will occupy the Square Mile site bombed by the IRA in 1992. However, a legal challenge to halt the construction is likely to come from the Baltic Exchange.

The Baltic Exchange sold the site to Kvaerner, then Trafalgar House, in December 1994 for £10m. At the time Baltic officials were told by English Heritage and the City fathers that their headquarters must be re-assembled in its original form as it was a grade II star-listed building.

The Baltic yesterday declined to comment on what action it would take but told City officials there was no case for completing demolition of the existing structure. The Baltic is also worried that Norman Foster's design involves an ancillary building being constructed to house various support services for the 180-metre tower.

Swiss Re bought the site from Kvaerner and plans to bring in at least 2,500 staff although the building would in theory have capacity to hold up to 4,000 people.

Norman Foster originally proposed a £400m millennium tower - which would have been the tallest building in Europe and dwarf Canary Wharf; but this plan was dropped after complaints.